How The Debt Collection Statute Of Limitations Laws Affect Your Ability To Collect Your Past Due Debts

The debt collection statute of limitations refers to the window of time that collection agencies can continue to legally pursue delinquent, unpaid debts. This basically means that unpaid debts have an expiration date, after which collection agencies have to stop with their collections activities.

This time period for collecting a debt varies from state to state, and it shouldn’t be confused with the time limit for credit reporting. These are separate and distinct issues.

Debt Recovery Statute Of Limitations Time Period

Bear in mind that the debt collection statute of limitations time period starts from the last date of reported activity on the account. This is the date that is shown on your credit report. Note also that this differs from the date that the account became overdue.

Activity on the account can include making a payment, making payment arrangements or agreements, or even the promise of a future payment can constitute account activity.

For instance, if a customer makes one partial payment, this can reset the time period back to zero on the day the payment is made. Customers intending to ignore paying their bills altogether can avoid making any contact at all. These delinquent debtors know that by allowing the debt collection statute of limitations clock to lapse, then the possibility for collecting the debt has passed because of the missed opportunity window.

How Can The Debt Collection Statute Of Limitations Assist Business Owners?

When business owners understand how the debt collection statute of limitations works, they can start to use these rules to their advantage and help in their debt collection strategies.

Knowing that by encouraging past due customers to enter into payment arrangements and/or make partial payments can restart the statute of limitations time clock over again can be a tool to increase the amount of time you have to collect past due debts.

This can also force business owners to rethink their past due debts and take action. When you know that you have a limited window of time in order to collect an unpaid debt, you might reconsider your debt collection efforts. You may even decide to outsource to third party collection agencies to help you recoup your debts sooner rather than later.

What Is Included Under The Debt Collection Statute Of Limitations?

Excluded debts not covered under the debt collection statute of limitations include federal and state income taxes, child support, and federal student loans. Regardless of the amount of time that has passed, there is no expiration date to prevent collecting these types of accounts.

Most other types of unsecured credit contracts are covered. If you have any concerns or doubts about how the debt collection statute of limitations might impact your own debt collection efforts, then you might contact a collection agency, or an attorney, that can help you understand your rights.

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